Twitter paid $36 million over IBM patent threat

Big Blue said Twitter infringed three patents; a deal was quickly arranged.

Twitter's first annual financial results were revealed on Thursday. Buried deep in the document is the price it paid IBM after it was confronted with a patent infringement threat by Big Blue: $36 million. Bloomberg was first to highlight the price tag.

IBM sent a letter to Twitter in November saying it was infringing at least three IBM patents. That resulted in a negotiation that ended up with Twitter getting a license to IBM's patents, acquiring about 900 of them for itself, and (we now know) paying $36 million.

The patent exchange was spun in positive terms, as something that would boost Twitter's intellectual property portfolio to help it defend itself from other threats against competitors. The exchange does do that, but this "deal" wouldn't have happened but at the end of IBM's massive patent gun, which was pointed at Twitter right before its IPO.

IBM is the largest US patent-holder. At one point, the company was receiving $2 billion annually from patent licensing.

The $36 million payment represents more than 5 percent of Twitter's 2013 revenue, which was just under $665 million. Overall, the company experienced a $34.3 million net loss for the year—so it might have been in the black, if it hadn't been for the IBM patent payout.

The three IBM patents asserted in November were: US Patent No. 6,957,224, "efficient retrieval of uniform resource locators," No. 7,072,849, "Method for presenting advertising in an interactive service," and No. 7,099,862, "programmatic discovery of common contacts."